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Car Insurance FAQs #3

Why is the insurance company not returning all of my premium after the policy was canceled?

Depending on the type of policy, you may be required to pay a minimum premium, or the premium may be fully "earned." In other instances, if you replaced your coverage with a different company, during the policy term, you may be subject to a "short-rate" penalty, which is usually about 10% of the unearned amount. You might also have some premium due for recent changes in coverage. The company should be able to provide a detailed billing history that explains the return-premium calculation.

Am I required to complete a medical questionnaire?

Insurance companies generally may not cancel your coverage if you do not respond to a medical questionnaire. The only exception to this is if your policy is considered "new business" which means that it was placed within the last 60 days. Insurance companies are not prohibited from asking you to complete a medical questionnaire. They do have a right to know if there are medical conditions that have developed which might make it impossible or difficult for you to operate a motor vehicle.

Why am I required to carry uninsured motorists coverage?

Uninsured motorists coverage is required by law. It was introduced many years ago to try to address problems that arise when insured drivers are involved with accidents with others who do not carry liability coverage. Even though we now have mandatory automobile liability insurance, the Department of Motor Vehicles (DMV; or Bureau of Motor Vehicles, BMV) estimates that about 7% of all operators are still uninsured. This coverage protects you against bodily injury losses caused by an uninsured or underinsured driver, and is only a small part of the cost of insurance.

The agent quoted me a premium for a new policy, which I accepted, but the policy came in at a higher rate. Doesn't the company have to honor the quote?

No, the company must calculate your premium in accordance with its current rates that have been filed with and approved by this Bureau, even if the agent quoted a lower premium. The agent's quote could have been in error, or the information you provided to him may have been incomplete or incorrect. Companies order motor vehicle records, claim reports and credit reports, each of which may affect the final premium, and may contain information that was not available to the agent at the time of the quote.

The company is charging me an additional amount on each bill for an "installment fee." Is this legal?

Most US States law does not require an insurer to provide installments in lieu of requiring payment in full at the beginning of a policy. Installments are offered for the benefit of policyholders, and result in an increased cost to the insurer. These nominal fees are permitted.

My teenager just got his license. The company has added him to my policy even though he's not going to drive my cars. Can they do that?

Yes. Any resident holding a drivers license is considered to have access to the household vehicles. Your policy includes any resident family member as an insured under your policy. As the policy automatically provides coverage, the insurer is allowed to consider any resident driver when establishing the rates for your policy.

My agent indicated that the company will add my daughter to my policy and charge for her, even though she only has a permit. Is this acceptable?

Yes, she is considered a licensed driver. Under US law, the definition of driver’s “license” typically (in most states) includes a permit or privilege to operate a vehicle.

Why are auto insurance rates higher for younger drivers?

Young drivers have statistically shown poorer loss experience than other drivers. In other words, they have more accidents because they have less driving experience than other drivers. Rates are structured so that drivers with greater frequency or cost of accidents pay higher rates than drivers with lower frequency. Rates are based on the average experience of a group of drivers with similar characteristics, so young drivers as a group have higher rates.